BLS DAILY REPORT, MONDAY, MAY 17, 1999
__Consumer prices charged ahead at the fastest pace since the Persian Gulf
conflict, igniting some fears that the nation's benign inflation environment
may be changing. Seasonally adjusted data from BLS show that the CPI-U
leapt 0.7 percent in April, the biggest increase since October 1990, when
consumer prices climbed at an identical rate. In addition, the core CPI --
which excludes the effects of volatile food and energy prices -- advanced a
surprising 0.4 percent during the month, double what most Wall Street
economists had expected. ... Surging energy costs led the upswing in
April's CPI-U, accounting for about half the month-to-month gain in prices.
Overall energy costs soared 6.1 percent, the largest increase posted since
the government began keeping tabs on energy costs in 1957, BLS economist
Patrick Jackson tells the Bureau of National Affairs. Gasoline prices lunged
ahead a record 17.0 percent during the month. ... (Susan McInerney in Daily
Labor Report, page D-1).
__Consumer prices rose in April at the fastest monthly pace in nearly 9
years. The report surprised traders and analysts and sparked a sell-off on
Wall Street amid investor fear that long-dormant inflation may be stirring.
.... This all occurred just a day after the Dow reached a record high
following, among other things, a benign report on wholesale inflation. Such
whipsaw weeks have become typical in the country's unique economic
environment. ... Recent reports of increased worker productivity argue
against any immediate tightening of interest rates, some said. ...
Accompanying the price news was a separate report that showed the country's
manufacturing output rising 0.6 percent in April. Combined, the reports
show the economy steamrolling onward in the 9th year of an economic
expansion that shows no signs of abating. In recent weeks, the government
has also reported that employee wages are rising modestly and that inflation
is not a big threat to an economy that Fed chief Greenspan has called
"phenomenal." ... (Tim Smart in Washington Post, May 15, page A1)_____The
prices that American consumers pay for goods and services rose abruptly in
April from March in a variety of sectors for a whole host of reasons, writes
Stephanie Stoughton in The Washington Post (May l5, page E1). The biggest
story, of course, is gasoline prices. ... But customers also paid higher
prices for clothing as warmer weather apparel hit the racks at full price.
On many grocery shelves, fruits and vegetables were pricier because of cold
weather in California and droughts in Florida. Smokers likely noticed the
end of the big tobacco promotion, causing tobacco prices to jump 3.6
percent. ... A healthy travel industry has contributed to higher hotel
rates and air fares. ... Prescription prices have been steadily rising as
pharmaceutical companies increase the cost of generic medicine, said Patrick
Jackman, a Labor Department economist. "There is a huge difference" between
generic and branded medicine prices, Jackman said. "That has narrowed
some." ...
__Inflation, driven in part by rising oil and gasoline prices, moved up
sharply at the consumer level in April, leading analysts to say that the
remarkable decline in inflation over the last several years may be over.
But at the same time, economists are not predicting that inflation is taking
off. It is just that, after the meager 1.6 percent rise in the CPI last
year, which can be attributed largely to plunging oil prices, inflation is
now likely to return to the 2.3 percent pace of 1997. ... (Jonathan
Fuerbringer in New York Times, May 15, page B1).
__Is the best news on inflation behind the U.S. economy? Inflation
watchers, who have been lulled by an endless string of tame reports, got a
shock Friday when the Labor Department reported that consumer prices rose
0.7 percent in April, the largest monthly gain in nearly 9 years. The
increase was driven by a spike in energy prices. Even more alarming: After
stripping out the volatile food and energy sectors, consumer prices still
jumped 0.4 percent -- the biggest monthly increase in more than 4 years.
The move reflected rising prices for housing, clothing, and medical care.
.... (Wall Street Journal, page A2)_____"It's been a long time since economy
watchers went through this kind of mood swing," writes Bernard Wysocki Jr.
in The Journal's "The Outlook" column (page A1). ... Suddenly, the
technology miracle was yesterday's news. ... But whatever the Fed decides
to do, one thing remains clear: The information technology revolution
continues. Companies continue to harness computers and networks to drive
tremendous efficiencies in their businesses. ... Friday's report is one
terrible number amid a slew of favorable ones. Wage increases are moderate,
producer prices are benign, and the price of gold, an inflation signal of
sorts, is sinking. Also, there were some unusual price spikes in the price
index, such as cigarette prices. "It's full of one-timers," says the chief
economist at the National Federation of Independent Business. "Inflation is
a fear, not a fact." ...
Real average weekly earnings continued to decline in April, with an upswing
in consumer prices more than offsetting gains in hours worked and average
hourly pay, BLS reports. ... (Daily Labor Report, page D-20).
U.S. industrial production rose 0.6 percent in April, and output for March
was revised up to 0.5 percent, the Federal Reserve says. ... (Daily Labor
Report, page D-24; Wall Street Journal, page A2).
Business inventories increased 0.5 percent in March, led by a big jump in
the inventories of retailers, the Commerce Department says. ... (Daily
Labor Report, page A-3).
When financial crisis swept through Asia, Brazil, and Russia last year,
American industry prepared to duck. With goods accounting for over 70
percent of exports, manufacturers were sure to take a hit. And sure enough,
they did. Manufacturing exports, as estimated by the National Association
of Purchasing Management, fell for 14 consecutive months starting in the
fall of 1997. Employment in manufacturing, meanwhile, fell by 400,000 last
year, and the association's widely publicized measure of manufacturing
production indicated steady declines throughout 1998. But the negative
arithmetic misses the point, says the president of the National Association
of Manufacturers, the industry's largest trade group. "The best estimates
show that manufacturing survived the Asia crisis just fine," he said. "In
fact, it is thriving." He backs his assertion with government statistics,
different from those compiled by the purchasing managers. His data show that
production, which certainly stumbled for a while, has now recovered and is
again rising at a brisk pace. Another sign of manufacturing's revival came
Friday when the Federal Reserve reported that industrial production rose 0.6
percent in April, the strongest gain since August. Industrial employment is
continuing to fall, but that trend actually reflects the sector's enduring
strength -- fast-paced innovation that drives up productivity, allowing
manufacturers to churn out more automobiles, refrigerators, and computers
with fewer workers. Some of the productivity gain can be traded to "hard
technology" innovations embedded in high-speed data processing systems and
computer-driven machinery. But other gains are driven by "soft technology,"
innovations which alter the way people, equipment, and materials are
organized and managed. ... (New York Times, May 15, page B1).
In the battle of the corporate budget, U.S. businesses have enjoyed an
offset to their rising labor bills. During most of the 1990s, the price of
everything else needed to run a business -- from computers to phone service
-- has fallen. In some cases, sharply. But this year and next, businesses
will likely have to contend with higher interest rates and rising prices for
energy and other materials. This may mean an end to cheaper commodities.
.... (Business Week, May 17, page 130).
The federal government plans to put a World Wide Web service into operation
today that is designed as a quick and easy way to find government documents
and resources on line. But the service will not be free, stirring criticism
that the administration has forgotten its promise to make the Internet and
government data more accessible to everyone. The new service,
usgovsearch.com, will link together thousands of previously discrete federal
Web sites and provide cross references for more than 3.8 million individual
government and military Web pages. For the first time, it will be possible
to perform searches for topics as general as "missile technology" or
"judicial branch" and compile results from any or all of the discrete data
bases. The intended benefits include a new, easier way to search through
the voluminous materials in the Commerce Department's National Technical
Information Services, a trove that is generally considered to be one of the
world's most valuable collections of scientific, engineering, technical, and
business reports. Until now, individual federal Web sites have been freely
accessible. That will not change. But people reaching and using those
sites via the new search service will need to pay a $30 monthly subscription
fee or $15 for a one-day pass. .... (New York Times, page C1).
Employers are bracing for another year of substantial cost increases for
health care in 2000, along with more complaints from workers about their
insurance. Analysts expect rates to rise 7 to 11 percent for large
companies, about the same as this year, and more for smaller firms. That's
bad news for employers, who flocked to managed care in the late 1980s and
early '90s to avoid just those kinds of annual cost increases. ... The
increases are driven by: Rising drug expenses; reduced competition because
of hospital, health plan, and doctor group consolidation; and insurers
playing catch-up after initially setting low rates to gain market share. ...
(USA Today, page 1A).
DUE OUT TOMORROW: Mass Layoffs in February 1999
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